INTERVIEW - Amartya Sen says happiness important for growth

India's Nobel economics laureate Amartya Sen speaks during a conference in his honour for development, freedom and welfare in New Delhi in this December 19, 2008 file photo. REUTERS/B Mathur/Files

LONDON (Reuters) - Levels of happiness could help shape economic policy in the industrialised world in the same way such factors have gained prominence in developing countries, said economics Nobel laureate Amartya Sen.

Sen, 76, said citizens’ quality of life and their general wellbeing should be considered as a measure when looking at overall economic success, particularly since developed countries face social issues such as unemployment despite economic growth.

Last week France said it planned to create new statistics, in addition to traditional Gross Domestic Product (GDP) figures, in response to a report by Sen, fellow Nobel laureate Joseph Stiglitz and the OECD, which recommended using happiness, quality of life and distribution of income to assess economic growth.

Sen, professor of economics and philosophy at Harvard University in the U.S., welcomed France’s move. He said considering such indices rather than just the narrowly focused GDP -- a country’s total value of goods and services produced -- could improve policymakers’ responses to problems in the economy in the wake of the global financial crisis.

“If you have indicators that concentrate on human wellbeing and human freedom then you could get there much more quickly by thinking about policy decisions in that light,” the Bangladeshi-born economist told Reuters.

“It is a question of seeing the need for a dialogue... and to adapt your policies connected with a more informed understanding of human predicament,” he said in an interview.

In the 1990s Sen helped created the Human Development Index (HDI), a United Nations statistic ranking countries’ level of development based on health, knowledge and standard of living.

The annual index often attracts attention from policymakers and non-governmental organisations and highlights disparities among countries which have similar levels of income per capita.

Sen said developed countries should discuss the need for indicators which were less elementary than the HDI, but which would provide a better understanding of social issues which are not covered in GDP calculations.

“You take the situation in America now where the gross domestic product has stopped falling and is beginning to rise ... but as long as unemployment continues to rise, the lives of many Americans remain very precarious,” he said.

“And given that fact, we have to shift our attention from gross domestic product to other indicators which are more sensitive to the adversity of human predicament such as unemployment,” he said.

The United States’ GDP grew at an annual rate of 3.5 percent in the third quarter, pulling the country out of the worst recession in 70 years. Despite the better-than-expected growth the unemployment rate in October rose to 10.2 percent, the highest in 26-1/2 years.